Layoffs will hurt, but sky is not falling, officials say

Posted: Sunday, April 27, 2003

By HAL SPENCEPeninsula Clarion

Agrium's announcement it will cut some 65 high-paying jobs, reducing its workforce by 20 percent by the end of June, is not welcome news to the Kenai Peninsula economy, but neither does it signal the end of the world, government officials said this week.

The oil and gas industry continues to explore in Cook Inlet and new infrastructure, such as the Kenai-Kachemak gas pipeline, is being built. Along with that, there has been interest expressed by retail companies in filling the void left behind by Big Kmart, they said.

Still, the Agrium cuts are going to be felt.

"Any layoff of that magnitude bothers me and should bother anyone worried about the economy of the Kenai Peninsula area," said Sen. Tom Wagoner, R-Kenai, from his office in Juneau.

Wagoner said he hopes the job cuts won't have a negative impact on the progress of House Bill 57, a measure that would change the way the state determines its natural gas royalties and benefit Agrium by making it easier to predict overall production costs.

Wagoner said he didn't know at this point exactly what layoffs are coming, but he worried that safety at the plant might become an issue if too many jobs are terminated. He said if adequate gas supplies can be found, that perhaps Agrium would rehire some of those who will lose their jobs.

Wagoner also said Agrium officials had thought this through, and the move was being done to ensure that the Agrium plant continues operations in Nikiski.

He noted that oil and gas exploration continues in the Cook Inlet region, that new oil rigs are pumping and pointed to the ongoing construction of the Kenai-Kachemak gas pipeline as indications that the oil and gas industry are optimistic about the future of operations in the inlet area.

"Yeah, the layoffs will hurt the local economy some, but we've weathered other layoffs at one time or another," he said.

Bagley said he fully expects some major retailer to replace Kmart in Kenai. And, he said that if more gas is found, Agrium might well expand its operations and refill lost jobs. He said he is looking forward to a planned state oil and gas lease sale that could test industry interest in the local gas market.

"We're obviously saddened to see layoffs at Agrium," said Bill Popp, the borough's liaison to the oil and gas industry. "These are valuable jobs and a substantial portion of their workforce. It will have reverberations in the economy. The loss of several million in annual payroll is going to hurt."

Still, Popp said he would not put the current economic downturn on a scale with that of the mid-1980s when the oil industry as a whole went into a downswing.

"I think the economy now is better able to bounce back. There is new gas exploration, new infrastructure being built, there's the potential for Outer Continental Shelf leases and state leases later this year," he said. "This is a period of transition in the oil and gas industry and there will be some short-term pain. But in a few years, there will be new activities to help to turn things around."

Popp said he is hopeful Agrium has put together a package that will minimize the loss of revenues to the local economy and encourage retirees to stay in the area.

Andrew Schmahl, project coordinator with the Kenai Peninsula Economic Development District, said the layoffs are a disappointment, especially atop other job losses at Kmart and the Kenai Peninsula School District. But he cautions against overreaction.

"It's not time for Chicken Little to start screaming, The sky if falling!'" he said. "There are a lot of bright spots in the peninsula economy."

Schmahl said one important step the local economy can take is to focus on tourism, an industry in which the raw material visitors is entirely renewable, unlike oil and gas resources that will run out one day.

Members of the tourist industry could take a lesson from the oil and gas industry, Schmahl said.

While that industry is one of the most competitive in the world, oil and gas companies also recognize the value of speaking with a unified voice at times, especially to government. If the tourist industry adopted a similar approach, collectively they might garner the kind of support for tourism enjoyed by the oil and gas industry in Alaska, he said.

As to the Agrium layoffs, Schmahl said business works in cycles and that Agrium is likely doing what it needs to in order to survive. The layoffs might be justified if it means Agrium is here and operating a decade or more from now, he said.

All the layoffs happening in the central peninsula do not appear to be having a negative impact on the local real estate market.

"We are not seeing any panic," said Glenda Feeken, a real estate agent with Re/Max of the Peninsula in Kenai. "There is no dropping of prices, no fire sales."

Feeken said the Kmart closure is not affecting the market so far, though clearly people are out looking for jobs. She said she was confident that another retailer would step into the Kmart void.

A void that could be left unfilled, however, might be in the classroom.

According to school district officials, it's too early to tell exactly what impact the layoffs will have on school enrollment numbers. However, even a small drop is a big deal in a district already struggling with funding issues.

"There's nothing left to cut," district Superintendent Donna Peterson said Friday.

Peterson said the district currently is trying to evaluate the Agrium situation. She said officials will be contacting families affected by the layoffs in order to gauge how many students could potentially be leaving the area.

If enough students don't show up next year, she said there is a possibility that the district could end up laying off even more teachers.

"That's the worst-case scenario," she said.

In the short term, Peterson said teachers and school staff are trying to deal with immediate issues related to the layoffs. Children can become angry, sad or confused over a parent's layoff, she said, and school staff must be ready to handle any problems that arise.

"This news is still only 24 hours old to us," she said. "Right now we're just dealing with it."